OSI agrees poultry deal for US$45m

By Rod Addy contact

- Last updated on GMT

OSI now controls a company that can produce 120m broilers a year through the deal
OSI now controls a company that can produce 120m broilers a year through the deal

Related tags: Henan

The government in central China is reporting that OSI has agreed to buy out full control of the joint venture poultry breeding and processing firm it runs in Henan province.

The US firm announced it will pay RMB300 million (US$45m) for a controlling stake in the joint venture, which has a capacity to produce 120 million white-feathered broilers a year. That makes it the biggest such facility in Asia when it was brought online in 2013.

The announcement came at a meeting this week between OSI president David McDonald and the vice-governor of Henan, Zhao Jian Cai.

During the meeting, McDonald pledged to buy control of the company, which goes by the Mandarin name of Xihua Da Yong Fuxi Animal Husbandry.

Formed with local conglomerate Dooyoo (Henan) Industrial Group, the joint venture - named on OSI’s English website as Xihua Da OSI Poultry Development Company - is located in Chengdong Industrial Park on Gongye Road, Xihua County, Zhoukou. Also located in Xihua County is OSI Henan Foods, which is wholly owned by OSI.

'Great support'

During this week’s meeting OSI president and chief operations officer McDonald thanked the Henan governor for “great support”​ in securing permits to export to Japan from the firm’s Henan facilities.

In return, McDonald promised, OSI through expanding its operations would make “vigorous contributions”​ to the local economy. Henan province hopes for further investment from OSI, according to Zhao Jian Cai.

“Henan province is a major meat producing region but it’s also a large consumer market … and we have a very convenient logistics system,”​ said the vice governor according to a statement issued by his office.

Exports from its Chinese poultry operations appear to be a priority for OSI. Another OSI subsidiary in China -Fuxi Nongmu Development Co – near Weihai city in Shandong province on China’s east coast shipped 28,000 tonnes of frozen poultry worth US$37,800 to Iraq in the first half of 2016.

McDonald's, KFC

OSI has been a key supplier for fast food chains like McDonald’s and KFC in China for some time. It was at the centre of a scandal over allegedly substandard meat​ which ended in a ruling against the firm by a Shanghai court early this year. But since then the firm has energetically sought to mend fences with China.

Last year it signed an agreement with the AQSIQ, China’s export-import safety watchdog, on co-operation in agricultural products global inspection systems with a 'study society' organising field trips and promoting Sino-US cooperation in food safety. 

OSI entered China in 1991, opening a meat processing plant in Beijing. Processing plants were opened in Henan and Shanghai in 1996 and 1998 with the firm supplying KFC and McDonald’s as both chains expanded rapidly in China.

Strategic sense

Expanding in Henan province appears to make strategic sense for OSI given the province’s capital, Zhengzhou, is a hub for China’s railway system while the province’s population is the highest of any Chinese province.

Henan is also a nexus for the meat industry, being home to leading pork firms like Shuanghui and will be central to testing and tapping the domestic Chinese market.

However, OSI is also aiming to tap the regional Asian market as well as the global Halal market, according to statements by the company when the Henan facility was opened in 2013.

Related topics: Industry & Markets, China, Poultry

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